This is a rush transcript from "Fox News Sunday," January 1, 2017. This copy may not be in its final form and may be updated.

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SHANNON BREAM, FOX NEWS HOST: I’m Shannon Bream in for Chris Wallace.

President Obama makes bold moves on Russia and Israel in his final days in office. What does it mean for the incoming Trump administration?

(BEGIN VIDEOTAPE)

DONALD TRUMP, R-PRESIDENT-ELECT: I think Israel has been treated very, very unfairly by a lot of different people.

JOHN KERRY, SECRETARY OF STATE: The vote in the United Nations was about preserving the two-state solution. That's what we were standing up for.

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BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: Israel looks forward to working with President-elect Trump to mitigate the damage that this resolution has done.

BREAM: Today, an exclusive interview with Senator Tom Cotton on the state of U.S./Israel relations, the response to Russian hacks.

UNIDENTIFIED MALE: What Russia has been engaged in over the last few months and years is unacceptable and the president is sending a message today to tell them to cut it out.

BREAM: And Trump's pick for secretary of state.

And a look ahead at some of President-elect Trump's potential first actions once he takes the oath of office.

We'll break down his Supreme Court short list with a key advisor working with the transition.

Then, Trump's announcement of thousands of jobs coming back to the U.S. We'll get differing perspectives from Austan Goolsbee, a former economic advisor to President Obama, and Steve Moore, an economic advisor to Trump's presidential campaign.

Plus, as the new Congress gets sworn in two days from now, we'll ask our Sunday panel about the year ahead for Trump and lawmakers on the Hill.

All, right now, on "Fox News Sunday."

(END VIDEOTAPE)

BREAM: Hello again and happy New Year from Fox News in Washington. When President-elect Trump takes office, a little less than three weeks from now, he'll have to deal with the fallout from a flurry of bold foreign policy moves from the White House in the waning days of the Obama administration.

First, rising tensions with Israel after Secretary of State John Kerry defended the U.S. decision not to veto a U.N. resolution condemning Israeli settlements in the West Bank.

(BEGIN VIDEO CLIP)

KERRY: No American administration has done more for Israel's security than Barack Obama's.

(END VIDEO CLIP)

BREAM: And now, new friction with Russia as the Obama administration reveals its punishment for what it calls interference in the U.S. election. That's where we'll begin as I’m joined here in Washington by Senator Tom Cotton of Arkansas, a member of the Senate Armed Services and Intelligence Committees.

Senator, welcome back to "Fox News Sunday." Happy New Year.

SEN. TOM COTTON, R-ARKANSAS: Happy New Year, Shannon. It's great to be on with you.

BREAM: Let's start with the decision to take sanctions and actions against Russia, including expelling 35 operatives, closing two Russian intelligence compounds in Maryland and New York. There are a number of sanctions on Russian intelligence organizations, companies supporting them, individuals as well.

Is it enough?

COTTON: It's not enough, Shannon, and it's certainly too late. Vladimir Putin is KGB. He always has been. He always will be.

President Obama has consistently looked the other way from Russia's provocations and aggressions. The DNC hack last year was just one minor item in what Russia has done over the last eight years, to include things like invading and occupying Crimea and supporting rebels in eastern Ukraine, as well as threatening NATO airships -- or aircraft and ships and so forth.

But what has Barack Obama done for eight years? In the very early years of his administration, just months after Russia had invaded Georgia, he sent Hillary Clinton to push the reset button with the Russian foreign minister. In the middle of his re-election campaign in 2012, he told the Russian president that he would have more flexibility after the election. When Mitt Romney characterized Russia as our number one geopolitical adversary, Barack Obama mocked him and said that the 1980s wanted their foreign policy back.

I’m glad the president has finally realized the threat that Russia poses to the United States and our interests but I wish he had recognized this eight years ago.

BREAM: Well, Russian President Vladimir Putin has responded. Here's a bit of what he had to say. "As it proceeds of international practice, Russia has reasons to respond in kind. Although we have the right to retaliate, we will not resort to irresponsible kitchen diplomacy but will plan our further steps to restore Russian/U.S. relations based on the policies of the Trump administration."

He went on to invite all diplomatic children who are in Russia to New Year's and Christmas parties at the Kremlin.

What does his response say to you?

COTTON: Well, it's very heartwarming of President Putin. I would recommend the kids not take their iPads to the Kremlin unless they want Russian services know what apps they’re playing every day for the rest of their lives.

Look, what Vladimir Putin needs is a sense of new boundaries. He's had free rein throughout the world over the last eight years. He needs to have a sense of boundaries and to know that costs are going to be imposed if he crosses those boundaries.

The administration has not drawn those boundaries and they have imposed a cost, and in fact, they have gone farther than just being weak on Russia action. They have actively opposed measures to toughen up on Russia. I proposed measures in our annual intelligence bill, for instance, that would enforce existing travel restrictions on Russian diplomats -- by which I mean Russian spies in the United States -- that would force the government to crack down on these Russian spies who are traveling all around America without the proper approvals.

I got a call just weeks ago from a senior administration official after the election, after the hacking, asking me to remove that from the bill because it would be too provocative. So, it's not just that Russia has -- that the president and his administration has been weak on Russia, they have actively stopped other efforts by people like me and other Republicans and Democrats in Congress from trying to draw a firmer line.

BREAM: Well, my understanding is you went to the White House with a concept of something more formal, putting together a number of representatives from government agencies to fight back against Russian interference or coercion in our politics and what's going on here domestically. My understanding of that is that you got a response basically from the administration saying it was duplicative of what was already in place, it wasn't necessary.

Can you tell us more about the response you got?

COTTON: So, this is a second measure in the intelligence bill that the administration threatened to veto the bill over.

So, in the days of the Soviet Union, the Soviet Union had something called "active measures". They're influence operations. They're propaganda. They’re covert activities trying to undermine Western democracy.

I proposed to create an interagency panel in our government, like we’ve had in the days of the Soviet Union that would counteract these so-called "active measures". The Obama administration assured us that this was duplicative and they didn't need it. I would simply point out whatever they have in place right now must not be working given all that Russia has continued to do. In fact, just yesterday, the administration acknowledged that Russia has continued to try to hack U.S. information systems, even after Barack Obama reportedly told Vladimir Putin to, quote, "cut it out".

So, whatever measures they have in place have not been working. I wish they wouldn't have gone to such great lengths to undermine the efforts of Congress to take a tougher line on Russia the last eight years.

BREAM: Well, you mentioned a report that we got from the Department of Homeland Security and the FBI together, pointing out what they says are credible links showing the tools and infrastructure that Russian civilian and military operators, intelligence operators were using to penetrate numerous systems here in the U.S.

Now, we got a response from president-elect Trump to that saying, "It's time for our country to move on to bigger and better things. Nevertheless, in the interest of our country and its great people, I will meet with leaders of the intelligence community next week in order to be updated on the facts of this situation."

Is that enough for you? Do you think he needs to take a harder line when presented with the hard evidence that was outlined in this report?

COTTON: Well, again, the hack of the DNC last year, which the intelligence community said publicly was the result of Russian intelligence services or their affiliates is just one small example of Russia's nefarious activities over the last eight years.

Now, many Democrats and some of the media are trying to confuse that question, the action of the hacking, which Russian intelligence services or their affiliates undertook, with the impact on the election. And unless Vladimir Putin hacked into Hillary Clinton's calendar and cancelled all of her rallies in Michigan and Wisconsin, or cancelled her speeches in which she was going to lay out an effective agenda for the working class, that didn't have an impact on this election.

It was Hillary Clinton's own decision to create a private email server that had a much bigger impact, along with her failure as a candidate. So, it's time for Hillary Clinton to look in the mirror and the Democrats take stock of why they lost the election, rather than blaming it on Vladimir Putin or fake news or the Electoral College, or anything else.

Russia, though, will continue to be an adversary into the future and we continue to need to impose firmer lines on their behavior and to impose costs when they cross those lines.

BREAM: And to be clear, we always want to make the distinction. No one is alleging that Russia broke into voter systems, changed votes, changed vote tallies -- not those kinds of things -- that would have a direct impact on votes as they were counted and tallied in deciding the presidency.

I want to ask you about Rex Tillerson, the Exxon CO who has been nominated to be secretary of state. You've met with him. He has been criticized by those who feel he has too friendly a relationship with Russia.

Are you convinced he can take a hard line? How do you think he's going to, or not make it through the Senate?

COTTON: Well, I had a good conversation with Rex Tillerson not just about Russia and Putin, but about many of the issues that we face around the world, as well as the challenges of managing the State Department. I think it's a good thing when a secretary of state understands foreign leaders and understands the cultures and history of foreign peoples. I think it will help him take a firm line in defense of U.S. interests as secretary of state, in the same way that he took a firm line in defense of the shareholders of ExxonMobil's interests with Vladimir Putin when he was the CEO of ExxonMobil.

That's what we need: hardnosed, clear eyed, unsentimental statesmanship that we haven't had the last eight years as President Obama and his administration have continued to look the other way and continued to conciliate and appease adversaries like Vladimir Putin.

BREAM: Well, and this administration also took some bold steps in recent days with regard to Israel, that vote at the U.N. They didn't veto it. They didn’t block this measure that moved forward.

John Kerry, secretary of state, in defending that in a speech after the vote talked about the fact that no administration has been better to Israel. He talked about a number of times that this administration has defended Israel.

You said this, though, about the U.N. vote, "This cowardly disgraceful action cements President Obama's richly deserved legacy as the most anti-Israel president in American history."

Clearly, a disconnect between the two views on the way you see his legacy.

COTTON: Well, I think the last week has been a fitting punctuation mark on eight years of Barack Obama's presidency. First he abstained at the United Nations in the same way he abstained from leadership in the world for eight years. And second, he was much harsher on his allies than his adversaries.

At root, the problem that we face in the Holy Land is not Israelites building new neighborhoods around Jerusalem. It's the Palestinians refuse to acknowledge Israel's right to exist as a Jewish state in the Holy Land. Until they do that, there won't be a peace agreement between the two peoples.

BREAM: Benjamin Netanyahu reacted to Secretary Kerry's speech and he made a very specific allegation. Here's a bit of what he said.

(BEGIN VIDEO CLIP)

NETANYAHU: We have it on absolutely incontestable evidence that the United States organized, advanced and brought this resolution to the United Nations Security Council. We'll share that information with the incoming administration. Some of it is sensitive. It's all true.

(END VIDEO CLIP)

BREAM: But you said that President Obama is personally responsible for that U.N. resolution. Quote, "His diplomats secretly coordinated the vote."

Are you privy to evidence? What do you base that claim on?

COTTON: No, I’m not privy to what Prime Minister Netanyahu is speaking about, but anyone with an ounce of common sense knows how the real world works and knows how the United Nations Security Council works. Senegal and Malaysia, some of the countries that sponsor this resolution, don't call the shots there. If Barack Obama and John Kerry and Samantha Power hadn't been speaking for months about the prospect of this resolution and had not been creating a climate inside the Security Council to let it come forward without firmly saying we will veto any one-sided anti-Israel resolution, no country would have brought that resolution forward.

It only could have been brought forward and passed with explicit United States coordination with other members of the Security Council.

BREAM: Very quickly, we're just about out of time. You wrote an op-ed in The New York Times about immigration, saying, President-elect Trump has a "clear mandate to stop illegal immigration, but also to finally cut the influx of low skilled immigrants that undermines American workers."

So, you know there are going to be those who say he didn't win the popular vote, there's not a clear mandate. But also, question whether you’re saying, we also need to slow legal immigration?

COTTON: Yes, absolutely. Illegal immigration is a real problem. That was a big issue in the campaign as well, to build a wall and to crack down on criminals and drug dealers who are here illegally.

But our immigration system for too long has brought in too many unskilled and low skilled workers which has undercut wages for working Americans. We need an immigration system that focuses on the well-being and the needs of American citizens.

Whether they can trace their ancestry back to the Mayflower or whether they are brand new immigrants that just took the oath of citizenship, and our economy simply doesn’t need the levels of unskilled and low skill immigration that we have today when we're giving out a million green cards a year, a million more temporary visas every year, that undercuts American wages. We need to focus on ultra high-skilled immigration that fits demonstrated economic need.

BREAM: We know all of those reforms are heavy lift on Capitol Hill. So, we'll be watching.

Senator, thank you for up time today and happy New Year.

COTTON: Thanks, Shannon. Happy New Year.

BREAM: Up next, we'll bring in our Sunday group to discuss the rising tensions with Israel.

Plus, what would you like to ask the panel about the Midwest moves by the Obama administration before Donald Trump takes office. Go to Facebook or Twitter @FoxNewsSunday. We may use your question on the air.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOHN KERRY, SECRETARY OF STATE: That's what we were standing up for -- Israel's future as a Jewish and democratic state, living side by side in peace and security with its neighbors.

NETANYAHU: Israelis do not need to be lectured about the importance of peace by foreign leaders.

(END VIDEO CLIP)

BREAM: Secretary of State John Kerry responding to Israeli criticism of the U.S. abstention from a vote condemning Israeli settlement construction, saying it was in the interest of preserving the two-state solution to which Israeli Prime Minister Benjamin Netanyahu expressed disappointment.

It is time now for our Sunday group. Washington Examiner contributor, Lisa Boothe, Democratic strategist Julie Roginsky, Daniel Halper, The New York Post Washington bureau chief, and Charles Hurt, opinion editor for The Washington Times.

All right. We're going to get to Israel, but I want to start with Russia.

Lisa, we have this response from Putin saying, "I could respond in kind. I’m not going to. We're going to wait and see what the Trump administration does."

LISA BOOTHE, WASHINGTON EXAMINER CONTRIBUTOR: Well, I think because he's waiting to see what the Trump administration does because essentially these sanctions are meaningless once President Obama leaves office. I think what's really interesting here and I think part of the reason why we've seen Donald Trump react the way that he has is because this is clearly very politically motivated by President Obama. Even The New York Times has tipped its hat to saying that they very much question the effect of these sanctions.

And I think it's very much being done to, one, delegitimize Donald Trump's victory and also to try to box him in on Russia as well and foreign policy as he comes into office.

And so -- I mean, you look at the fact that Russia had hacked the Joint Chiefs of Staff, unclassified email server, 4,000 military and civilian personnel. Also the fact that China hacked 22 -- or compromised 22 million Americans' security information, as well as OPM, and what was the reaction from the president. But somehow this was what elicited a response from President Obama.

So, I think Donald Trump is looking at this and thinking that it's very much political.

BREAM: Well, Daniel, does it create an issue for his nominee for secretary of state, Rex Tillerson, in that he's been very vocal against sanctions saying in many cases they don't work and obviously lobbying against them where they would affect Exxon's business interests where he is currently the CEO. Now, he's going to have to answer more questions about that it seems going into a Senate confirmation hearing.

DANIEL HALPER, NEW YORK POST: Certainly, I think you can expect Democrats on Capitol Hill to request all communications between him and his company and Russia for the last ten years or something extraordinary where you're going to try to get as much information out of him as possible. This is going to be a real issue going forward.

I think it's not just that President Obama and President Trump are positioning, you can see in the response by Vladimir Putin and by Benjamin Netanyahu in Israel, you're seeing world leaders really shift their attention. They no longer take President Obama seriously. They no longer -- I mean, with the Israel action, there are real responses, of course, with the U.N. vote but they're no longer so concerned about that.

You really see them shifting their attention toward President-elect Donald Trump and treating him as though he is the president. And it's really altering foreign policy and really handcuffing President Obama at a time when he's trying to handcuff President-elect Trump.

BREAM: And to that point, we have a couple of tweets that went out from Donald Trump talking about Israel just days ago. He said, "We cannot continue to let Israel be treated with such total disdain and disrespect. They used to have a friend in the U.S., but not anymore. The beginning of the end was the horrible Iran deal and now this, U.N.! Stay strong, Israel. January 20th is fast approaching!"

The prime minister tweeted back, "President-elect Trump, thank you for your warm friendship and clear-cut support for Israel!"

Charles, also with an exclamation point.

CHARLES HURT, THE WASHINGTON TIMES: Yes, there's a new sheriff in town without doubt. I thought your interview with Senator Cotton was very interesting. He did a very good job of going through all of the transgressions that Russia -- that Vladimir Putin has committed against the United States the past eight years.

And, you know, the timing -- as you all said, the timing of this is very curious. The fact that, finally, the president has his dander up enough to do something about it and I think that the sanctions have very little to do with Vladimir Putin or Russia, and it has -- they have everything to do with Donald Trump and trying to set up something where, you know, when Donald Trump comes in, is he going to reverse this?

If he reverses this, how much political capital does he have to spend to do that? How much does it hurt Rex Tillerson? How much does that give Democrats sort of a political thing to use going forward against the Trump administration.

BREAM: Julie, what do you make of the criticism that -- although a lot of folks, of both sides of the aisle, are praising it, they say it's too little too late?

JULIE ROGINSKY, FOX NEWS CONTRIBUTOR: Well, first of all, it is too little too late. I will be the first to say, Tom -- and I say as a liberal, Tom Cotton was absolutely right in what he said this morning about how lax and how belated these actions are.

I also would say this is not so much the Democrats are driving this. The two biggest forces on the Hill who are driving this are Senator McCain and Senator Graham, neither of whom is certainly a liberal or a Democrat.

It does box the president-elect in in the following way. It seems to be a bipartisan consensus that you're going to have to do something much stronger than the Obama administration did to retaliate against the Putin regime. And for the president-elect to say, "Well, it’s time to move," as he did this week, and "let's focus on other things," it's much harder to do when you have Republicans and Democrats, but specifically Republicans like Senate chairman of the Armed Services Committee, Senator Graham, and other -- Senator Cotton certainly, all of whom believe that these sanctions don't go far enough and that you need to do something much stronger to punish Putin and his inner circle.

What does the president-elect do and potentially Secretary of State Tillerson do in response to that bipartisan pressure that's going to be put on him in January?

HURT: And I agree. And I don't mean to in any way downplay the importance of this, exempt that I wish the president had done more much earlier. But President-elect Trump did make a key part of this election about this effort to work with Vladimir Putin to combat terrorism. I agree that the guy is not -- he's an unsavory character and I would like it if we didn't have to do anything with him.

But that was part -- that was a major part of his campaign was to do that. And if that's how he wants to focus that relationship, I don't know that that's -- it's been settled at least at the polls.

ROGINSKY: Can I say about that real quickly?

BREAM: Sure.

ROGINSKY: Because you have the president-elect coming in saying he wants to work with Vladimir Putin. In 2000, George Bush came in and said, "I looked in Vladimir Putin’s eyes, I saw his soul." You had Hillary Clinton with the reset. He will learn very quickly, I hope, as his predecessors did on both sides of the aisle, that this is not a man we can work, that this is a man that will exploit every single weakness that he perceives the president to have in order to further his own agenda economically, domestically and internationally.

And as a result, the faster the president-elect understands that this is not somebody you can work with to stem terrorism when he, in fact, is fomenting terrorism in places like Syria by working with Iran overseas, the faster that happens, the faster the president-elect can get on with actually punishing Putin from what he does --

BREAM: I want to make sure that we touch on Israel as well, and what happened at the U.N. From Facebook, we have Hal Widsten who said, "What possibly did the Obama administration believe they could accomplish by taking this action less than a month before the newly elected president takes over?" Lisa?

BOOTHE: Well, I mean, he's changing U.S./Israeli policy essentially. That's what's happened from this U.N. resolution. It's going to be very difficult for the United States to try to reverse it. So, I think President Obama is trying to leave a lasting legacy regarding foreign policy by the abstention from that vote.

But I think what's deeply disturbing is Secretary Kerry had said during his speech that the abstention is representative of U.S. values. I think that really underscores sort of a distorted viewpoint of the Obama administration and their foreign policy throughout President Obama's presidency in the sense that even Steny Hoyer has said that the resolution tips the hand of the Palestinians.

So, we are essentially tipping the hand of -- you look at the Palestinian Authority and 10 percent of the budget goes towards supporting and paying terrorists and their families. The same to be said of the Iran deal, lifting sanctions for Iran, helping Iran rebuild their economy. Again, the largest state sponsor of terrorism.

So, I think -- and the Hamas spokesperson who is saying that they appreciate the resolution, who's praising the resolution, so I think it is deeply disturbing that President Obama and this administration thinks that is representative of American values when we have repeatedly propped up and helped these countries that support terrorism around the country, but yet we turn our back on Israel. We turn our back on our friend.

And as Benjamin Netanyahu said, this was an ambush attack and he called it a declaration of war. I find that very deeply disturbing that somehow the administration thinks this is representative of American values because it is not.

BREAM: Quick final word to you, Daniel.

HALPER: The Obama administration is not delusional enough to know this will bring about Middle East peace. It is about repositioning President Obama's legacy and repositioning the Democratic Party going forward.

BREAM: All right. And we'll talk about the Democratic Party with the panel when they return but we've got to take a break here.

Up next, who is on Donald Trump's short list for the Supreme Court and how could he reshape the judiciary with more than 100 federal court vacancies he'll inherit the minute he takes office. We'll discuss that with a transition insider, next.

(COMMERCIAL BREAK)

BREAM: With President-elect Trump’s inauguration less than three weeks away, he’s whittling down his list of potential Supreme Court nominees.

(BEGIN VIDEO CLIP)

TRUMP: We have to replace Justice Scalia with a person that is as close to Justice Scalia, if that’s possible, as we can get.

(END VIDEO CLIP)

BREAM: We’ll discuss who’s on the shortlist with a key adviser to the transition, next.

(COMMERCIAL BREAK)

BREAM: A look at the Supreme Court here in Washington where Donald Trump's pick to fill the seat left vacant by Justice Antonin Scalia, who died in February, could seal the high court’s conservative majority for years to come.

Joining me now, Leonard Leo, a lawyer who's been working on the Trump transition on its process for evaluating potential nominees.

All right. The president-elect has talked a lot about the kind of person he would like to take that seat. He's talked about folks that are strong on gun rights that are pro-life. Some of his critics say those are litmus tests and they think they're inappropriate.

Your response?

LEO: Well, first of all, I think the president made very clear throughout the campaign that he was looking for justices who were going to interpret the Constitution as the framers meant it to be. And so, that I think first and foremost is what he's looking for in a justice on the Supreme Court.

I think he's also looking for someone who's going to be extremely capable and bright. He said at one point during the third debate he wanted someone who was going to be widely respected by the legal and judicial communities and by the public at large. He wants someone who has a deep record of commitment to the Constitution.

And those are all of the different factors that are being considered right now as the president and the transition culture the list of 21 people who he announced as prospects for the Supreme Court during the campaign.

BREAM: I want to give you a chance to respond to a new letter that is out signed onto by a number of pro-life groups that they are worried about his making good on a pledge to appoint someone who is pro-life. They say, quote, "attempts to nominate a stealth candidate lacking in a record on abortion was a failed approach of the past." Continuing, "despite that, at least a half-dozen of the candidates on the list lack a pro-life record. Several of these judges on the list have even written or spoken in ways that are at odds with the pro-life position."

Is the letter valid? How will a President Trump assure pro-life voters and leaders that he'll make good on this promise?

LEO: Well, first of all, there are many very good groups and individuals right now who are weighing in on the qualifications of quite a number of people on the list of 21 that Mr. Trump put out. And we appreciate that because the president is working very hard to get this right. And these are people who have very deep records that have to be analyzed very carefully. And lots of cases have to be read. And there's no one particular statement or comment by any of these prospective nominees that can be viewed in isolation. So we certainly appreciate what the pro-life community and other groups are doing to weigh in on these various nominees and all of that information is being taken into consideration very, very carefully.

BREAM: All right, I want to talk through some of the names that keep bubbling to the top. Judge Bill Pryor serves on the 11th Circuit. He's called Roe v. Wade the worst abomination in the history of constitutional law, but there are conservatives who say they're worried about something else, a 2011 decision seen as a landmark expansion of transgender rights. "Slate" described it this way. "He supported an absolutely revolutionary opinion in 2011 holding that anti-trans discrimination qualifies as sex discrimination and is thus generally forbidden under the equal protection clause of the U.S. Constitution. Pryor didn't write the decision, but he did join in it in full, suggesting he endorsed its logic and conclusion."

You know that's an issue the Supreme Court is going to tackle very soon, even is going to touch on in a big case later in 2017.

LEO: Well, first of all, Shannon, as you know, Bill Pryor is a U.S. Court of Appeals judge who sits down in Alabama. He's been on the bench a long time. He has a very distinguished record of public service, having served as the attorney general of Alabama before serving on the federal bench for over a decade.

Bill Pryor has a very deep bench of judicial opinions. And the transvestite case you referenced is one of his opinions where he was bound by precedence of the U.S. Supreme Court, in particular a Pricewaterhouse case that involves gender stereotyping kinds of discrimination. And really that case is about applying Supreme Court precedent as faithfully as one can, which is what a court of appeals judge often has to do. They're bound by what the Supreme Court says. They have to apply those precedents to existing facts that come before them in particular cases. So I think that explains Judge Pryor's ruling more than anything else.

BREAM: I want to make sure that we touch on Judge Thomas Hardiman as well. Another federal appeals court judge. He is on the younger side, which, of course, a lot of people think is a benefit when you’re putting someone on a lifetime appointment on the bench. I’ve got to tell you, chatter around him is that he's a favorite of a lot of people out there. Why’s he on the list?

LEO: Well, first of all, he also has a very distinguished record of judicial service. He has the distinction of actually having served both as an appeals court judge and as a trial court judge in the federal district court, which is very valuable in the sense that we don't have many justices on the U.S. Supreme Court who understand how trial courts work. So that's, I think, very important.

He's a person of tremendous distinction, having attended Notre Dame University and Georgetown Law School. He -- he has an interesting personal story in the sense that he drove a taxicab to support his way through law school. So he has a lot of those personal qualities, as well as important intellectual qualities that I think make him a serious prospect for the U.S. Supreme Court among others on the list.

BREAM: And for those who are pushing Mr. Trump to consider appointing a woman to the bench, Judge Diane Sykes, a federal appeals court judge as well. A Bush 43 appointee. She's voted to uphold voter I.D. laws and in favor of gun rights.

But she’s got a couple of decisions that worry conservatives as well. She joined a decision forbidding the use of a church for a graduation ceremony. In a Planned Parenthood case, she ruled in favor of the organization and against an Indiana law that attempted to cut off funding to Planned Parenthood. She's been criticized for a ruling against those pro-life "Choose Life" license plates. What's the case for her?

LEO: Well, first of all, Judge Sykes has a long, deep record of judicial service. She not only serves on the U.S. Court of Appeals there based in Chicago, but she was also a justice on the Wisconsin Supreme Court. So she's got a very, very long, deep record of service on the bench.

She calls herself a textualist and an originalist, someone who interprets the Constitution according to its words and original meaning. And sometimes you have to take the law wherever it brings you. And in the case of some of these decisions that she's issued, she's interpreting statutes, she's interpreting the Constitution in light of Supreme Court precedent that she's bound by. And so you can't always just look at the results. You have to look at the methodology that a judge uses in reaching a particular decision. And she grounds herself in text and in the original meaning of the Constitution. And those are the kinds of things that the president was hoping to have in a justice when he talks about a justice who is going to interpret the Constitution and the laws as it was meant to be.

BREAM: Can you give us any hint on a timeline as we tick closer to Inauguration Day?

LEO: Well, that's up to the president, of course. And, as you know, the chief of staff and others have indicated that they want to move as quickly as possible. Perhaps having someone nominated around the time of the inauguration. The important thing to bear in mind is that we have one final sitting of the U.S. Supreme Court at the end of April. So, ideally, you would have someone who could be seated on the court at least by then to hear those final round of cases, perhaps even have some of the 4-4 decisions, if there are any, reheard by the court.

And so you had a 50-day period for one of the most liberal justices on the court. Ruth Bader Ginsburg. So hopefully we can have a nomination relatively soon and then a process of about 50 or so days within which to get someone confirmed.

BREAM: Well, we know you will continue to guide the president-elect as he makes this very important decision and looks at filling more than 100 federal vacancies on the bench in the lower courts as well.

Leonard Leo, thank you so much and happy New Year.

LEO: To you too, Shannon. Thank you.

BREAM: All right, coming up, President-elect Trump applauds the return of thousands of jobs to the U.S. We’re going to take a look at the impact and the stock market's run since the election, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: We have a combination of Sprint for 5,000 jobs and that's coming from all over the world and they're coming back into the United States, which is a nice change. And also OneWeb, 3,000 jobs -- that's a new company.

(END VIDEO CLIP)

BREAM: President-Elect Trump claiming another victory in a plan to bring back thousands of jobs to the U.S.

Joining me now from California, Austan Goolsbee, who is one of President Obama's long-time economic advisers, and here in Washington, Steve Moore of The Heritage Foundation. He was also an economic advisor for the Trump campaign.

Gentlemen, welcome to FOX NEWS SUNDAY.

STEVE MOORE, FOX NEWS CONTRIBUTOR: Hi, Shannon.

AUSTAN GOOLSBEE, FORMER OBAMA ECONOMIC ADVISOR: Thank you.

BREAM: All right, Austan, I'll start with you. Do you give the president-elect any credit for these jobs he talked about this week or for weeks ago the deal with Carrier?

GOOLSBEE: Well, look, I'm -- I’m happy that the jobs are going to come back. I'm a little nervous that the fact that Donald Trump is currently re-announcing jobs that he already counted. So when -- when SoftBank said they were going to move jobs and expand them in the United States, these were the jobs they were talking about. So he's -- he’s like a student trying to (INAUDIBLE) -- change the goal posts and just quote it as a different number.

BREAM: But if he had something to do with -- with the first announcement -- but if he had something to do with the initial announcement, either way, does he get any credit for whether it was announced weeks ago or for now?

GOOLSBEE: I mean -- I would give him some credit for it. You know, I would point out that under Barack Obama, in the last seven years, we've added 15 million private sector jobs. So I think they're going to need to speed up the job creation if they want to match what has happened under Barack Obama. But I give President-elect Trump some credit for that.

BREAM: All right, Steve, to that point, you know that the United Steel Workers, one of the union leaders there at Carrier, got into it with Mr. Trump saying he wasn't telling the truth about how many jobs were being saved. He told "The Washington Post" something I can't say on the air, but, quote, "he lied his blank off." Is this the kind of thing a president can be doing, though, going around making these individual deals, getting into Twitter fights with union officials? I mean how’s this going to work?

MOORE: Well, I think the idea, during this period between the election and his inauguration of -- of going to companies and saying, look, don't leave the country now, good things are coming. We're going to change the tax laws in a very pro-business way. We're going to get a lot of these onerous regulations that are strangling businesses off of your back. We're going to fix Obamacare and all -- and -- and basically I think he's sending a message, a, to businesses saying, you know, stay here, this is a good time to invest in the United States, and, b, I think he's sending a message to those voters in those Midwestern states, Shannon, like Michigan, Ohio, Wisconsin, Pennsylvania, Indiana, saying, I've got your back. For the first time, you know, I -- you know, it was President Obama who said, you can't just wave a wand and have these jobs come back. But I don't know if it's a magic wand, but so far he's actually persuaded a number of major companies to invest in the United States. And I think it's the start of something real big.

BREAM: Well, you talk about taxes and -- and there is optimism from all quarters --

MOORE: Yes.

BREAM: And both sides of the aisle, people hoping that there will be some changes. Steve Mnuchin, the Treasury secretary nominee, says that tax reform is something that happens within the first 90 days of this presidency. Let's touch up -- on a couple of points that we've heard from the president-elect so far with regard to individuals reducing the number of tax rates, dropping the top from 39.6 to 33, eliminating personal exemptions and for businesses reducing the top corporate rate from 35 down to 15 percent and restructuring taxes on pass-through businesses as well.

Austan, is there anything that you hear in the tax plan that works for you?

GOOLSBEE: Well, not really. And it’s -- it’s not about me. I mean people should just go look at it themselves. Donald Trump ran a campaign that was largely policy-free and the -- the broad outlines of what he's about to do are not understood by the American people. And they're in for a rude awakening. We're going to massively cut corporate taxes by trillions and it's going to be paid for by a value-added based national sales tax. I don't think anyone that voted for Donald Trump understood that's what he was planning to do. I'm not sure Donald Trump understood that's what he was planning to do. And if they now propose it, I'm going to be very interested to see how people react to that.

BREAM: Well, Steve, you were advising him along the way. Did he understand -- what did he understand of this plan?

MOORE: Well, look, I helped Donald Trump with Larry Kudlow and Steve Mnuchin put the plan together. I disagree with Austan. I think we were very, very specific about what that plan is, what we intended to do on the business taxes, what we intended to do to simplify the tax system. The heart of the plan, Shannon, is that business tax cut. We have the highest business tax rate in the world. I think even Austan and I may -- may agree on this, that, you know, it just doesn't work anymore for the United States to be competing against China, India, Germany, Mexico, all of these countries, and we're putting all of our companies at a -- at a disadvantage with respect to our taxes here. It’s like a -- I described our corporate income tax as a head-start program for every country that we compete with.

So we're going to go from being the highest tax rate country in the world to the lowest. And if you do that, I think it's going to be a magnet for businesses and companies and capital to move back to the United States. Tax rates do matter. The rest of the world’s been cutting them. We haven't. I think it's going to make -- make a significant change in terms of employment in this country. You can't have good jobs without healthy businesses.

BREAM: Austan, could we negotiate a little bit of a Kumbaya moment? Is there some of that you agree with?

GOOLSBEE: Well, look, there is some of that I agree with, but if you believe those are magic beanstalk beans, then I think, a, look around the world and say, well, who has the lowest corporate tax rate in the world? They must be doing great. It's Uzbekistan.

MOORE: Wow.

GOOLSBEE: So I don't think that just cutting corporate tax rates alone --

MOORE: That’s true.

GOOLSBEE: Especially if you don't pay for them or you try to pay for them with a national sales tax, makes any sense. And I think if you look at what the Trump administration is proposing, it's going to blow up the deficit in the United States. And it was promised to give us massive growth and massive job creation by George Bush when he did almost identical procedures as what Donald Trump is proposing. And it didn't work. The very same people who said it was going to work in 2001 are saying it now.

MOORE: Well --

GOOLSBEE: And I would just remind everybody, just go back and look at history --

BREAM: Is that -- is that accurate?

MOORE: Shannon, this -- this is --

GOOLSBEE: When they gave a massive repatriation holiday to companies in 2000 so that they could bring the money back --

MOORE: Well, wait --

BREAM: Steve -- Steve, is that -- is that accurate?

MOORE: No, look, I --

GOOLSBEE: It didn't create jobs.

MOORE: I -- look, I --

BREAM: Steve, is that accurate? Are we -- are we talking apples and apples?

MOORE: I believe that this economy is very fragile. I think that this has been an incredibly weak recovery and that's just not my opinion, every economist agrees that it's been a very flimsy recovery. We've borrowed $10 trillion over the last ten years. What we've done in the last decade just hasn't worked in my opinion. We do need a new approach.

Now, the tax rate reductions we're talking about are very consistent with what John F. Kennedy did in the 1960s, with what Ronald Reagan did in the 1980s. Those were two big boom periods in the United States. I think we can do it again.

It's not just taxes, though. We do want to get the regulations off of businesses. We do want to fix Obamacare so you can reduce health care costs. We do want to have a pro-America energy policy. And I believe if we do all those things, Shannon, we can go from 2 percent growth under Obama to 4 percent growth under -- under Trump.

BREAM: OK.

MOORE: If you get 4 percent growth, that deficit starts to decline very rapidly.

BREAM: Yes, and, of course, part of that equation is cutting spending and --

MOORE: Yes.

BREAM: I think we'd all agree that that is a tough thing to get done on Capitol Hill.

Mr. Goolsbee, Mr. Moore, thank you both for joining us. Happy New Year to you both.

MOORE: Thanks, Shannon, happy New Year.

GOOLSBEE: Thank you.

BREAM: Up next, we'll bring back the panel for a look ahead at the future of the Democratic Party and President Obama's claim that he could have defeated Donald Trump for a third term.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I'm confident that if I -- if I had run again and articulated it, I think I could have mobilized a majority of the American people to rally behind it.

(END VIDEO CLIP)

BREAM: President Barack Obama, in an interview with David Axelrod, a friend and former advisor, this week expressing confidence he could have defeated Donald Trump in a hypothetical third race for a third term.

We're now back with the panel.

Charles, what do you make of that?

HURT: Well, you know, it's another example of the president saying basically the problem here was that the American people weren't listening enough to me because, of course, he did campaign. He campaigned very hard and it was a referendum on him. And it -- they -- it was a rejection of not only -- I mean a rejection not -- you know, not only of Hillary Clinton, but of eight years of President Obama’s policies. He’s -- you know, he will always go down as a successful president in his mind because he won re-election and that was great. But it was at a -- at a grievous cost to -- to his party and I think the -- you know, the things that he was -- that he was pushing.

BREAM: Well, the vice president, in an interview with The L.A. Times, had some interesting, you know, thoughts on exactly what happens with the Democratic Party, where they may have missed it on this. He said, quote, "I believe that we were not letting an awful lot of people -- high school educated, mostly Caucasian, but also people of color -- know that we understood their problems." And he also talked about, quote, "a bit of elitism that's crept in" to party thinking, Daniel.

HALPER: Yes, he also, in that same interview, talked about how equality doesn't actually feed people. So I think he really gets at the heart of the Democratic problem. And what Barack Obama has never -- he’s never lacked confidence in his own abilities, obviously, and that's helped him tremendously in a certain way put himself forward. But the recognition of what came -- what he -- what happened to his own party, what limitations their agenda and how far left they went and how it prevented Americans from actually -- from their policies addressing Americans' needs, I think really needs to, in their comeback, and there will be a comeback on the Democratic side, they really need to recognize those shortcomings and provide and offer a solution to the American people.

BREAM: Well, and a lot of folks look at the lobbying and jockeying for the head of the DNC, Julie, and they look at some of the people who have been in that mix, Representative Keith Ellison, Secretary Tom Perez, and say those are not the most moderate people in the party. Does the party not get that maybe average Americans don't want the far left progressive agenda, as, you know, Daniel referenced, they want to feed their families?

ROGINSKY: You know, to me, the chairmanship of the DNC is only important in that it has to be somebody that understands the mechanics of how to campaign and get out the vote. What the ideology of the DNC chairman is to me is largely irrelevant in the face of that.

What is relevant to me is the message that Democrats are putting out to the extent that the vice president talked about, that Democrats, for lack of a better description, feel the pain of the people out there. And I took some onus on myself as well after the election. It is very easy for me, sitting in New York or Washington, to go and say, well, look, so many more people have health care thanks to ObamaCare, not understanding that many of those people are also paying a lot more money out of pocket for that health care. Very easy to say millions of jobs have been created, despite the fact that people are saying, these are not the kinds of jobs that we want. And so there was a failure of communication and I think -- and -- and to some extent he is right, some elitism when it comes to being condescending in trying to tell people that their life is great when they personally did not think their life was great. And I think I took responsibility for that right after the election. I think more Democrats need to look in the mirror and do the same.

Going forward, that's what the party needs to communicate. There are people in places like West Virginia or Kentucky who are about to lose a tremendous amount of health care if they repeal ObamaCare, and those are the people that voted for Donald Trump. The Democratic Party needs to explain to them why those policies are harmful to their own interests. That’s what needs to happen. We can't keep talking in the mirror about how great things are when for a lot of people they’re not that great.

BREAM: Well, and on the issue of ObamaCare, I want to play a little bit of what House Minority Leader Nancy Pelosi had to say, because we know this is one of the big upcoming fights on The Hill.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-MINORITY LEADER: You’re always listening, but it's not to dismantle. It's an existential threat to the access to care in our country that would be a problem.

(END VIDEO CLIP)

BREAM: Lisa, she says they'll be listening but they’re not going to get on board with dismantling.

BOOTHE: Yes, you know, we’ll see. I mean there's ten -- at least ten senators that are running for re-election in states that Donald Trump won, five states in which he won by double digits. But what's interesting, if you remember, Senator Chuck Schumer, before the 2016 election, had alluded to the fact that ObamaCare was a mistake because they should have focused on middle class voters and policies that embittered their life. And so, if you remember, before 2016, he had made that comment that that was a mistake.

But to President Obama's point, I think his comment really came from a place of insecurity because for a guy who's been so focused on his legacy and someone who has done the most of his legacy by executive fiat, whether it's the Paris climate deal, or the Iran deal, a lot of it’s going to be eradicated. And -- and so the great irony here is the fact that we have a president who's been so focused on his legacy and done so much in the name of legacy, whether it's Guantanamo Bay, whether it's the withdrawal of troops from Iraq, much of what he's done is just simply going to go away because he lost the election. And the only lasting legacy that he really has, ObamaCare, was done on a strictly partisan basis, which we've never seen before with a major entitlement, whether it's Medicare, Social Security, even Medicare Part D. You know, and so I found that to be really interesting from his comments. But, you know, I do think that the Democratic Party needs to refocus its message more -- more largely speaking.

BREAM: Well, and, Daniel, to the point of that so much of this was done through executive action and fiats and those kind of things that can be undone, it's a much tougher business to get up there and legislate, make the sausage on The Hill. Will a President Trump be different in that respect?

HALPER: Well, that’s the question, right, Republicans have gotten very good at being in opposition and they were very good at sniping. Can they actually govern? And when they repeal ObamaCare, which I think they will, as they promised to do, they then take responsibility for the entire health care system, much in the same way that President Obama did when he implemented ObamaCare. So it's going to have the reverse effect with people losing their health -- current healthcare plans. Huge upheaval in a massive sector of the economy and it really creates a huge problem that's looming right ahead for Republicans.

BREAM: All right, raise your hand if you really think they're going to repeal it, because you said you think it gets done.

HALPER: I do.

BREAM: Two. Maybe more.

ROGINSKY: I think -- they repeal it and delay it, I believe.

BREAM: All right.

BOOTHE: But to replace it, they're going to need Democratic support.

BREAM: It’s going to take a lot of work.

All right, panel, thank you very much. We will see you next Sunday.

Finally, we want to thank you for watching each week throughout this very busy news year. And as we say good-bye to 2016 and look ahead to 2017, we want you to see these names. They're all the people who work so hard every week to put this program on the air.

Chris will be back next week. In the meantime, from all of us, happy New Year and we'll see you next "Fox News Sunday."

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